Insurers, miners boost Europe indexes

Prudential surges as it rebuffs Aviva approach

By

SarahTurner

LONDON (MarketWatch) -- European markets gained ground on Monday as consolidation moves continued to lift the insurance sector, with a rise in metals prices also lifting markets.

The German DAX 30 index (1876534) gained 0.4% at 5,902, though the French CAC 40 index (1804546) and the U.K. FTSE 100 index (UKX) each ended lower, hurt by losses in the energy sector. See London Markets for U.K. trading.

Data released Monday supported the view that interest rates are likely to continue to rise in Europe.

Producer prices in Germany rose 0.7% in February from January, gaining by 5.9% on a year-on-year basis, the fastest annualized growth rate since June 1982, the Federal Statistical Office said Monday. The rise was much higher than the 0.1% monthly rise forecast by economists.

Insurers build on gains

Insurance stocks built on gains made last week amid renewed speculation over prospective mergers and acquisitions.

Prudential said a stock-swap offer from Aviva is not "in the best interests of its shareholders" and said it was confident in an independent future. See full story.

"Although it has already rejected the 708 pence offer, the Aviva bid has put Prudential in play," noted analysts at Bear Stearns.

The broker added that Prudential is an attractive target to other insurance companies, especially for its Asian and U.S. businesses.

The Bear Stearns analysts said they believed France's Axa (012062)
AXA, +0.06%
could be a likely rival bidder given U.S., U.K. and Asian overlap between the companies. Other potential bidders include American International Group Inc.
AIG, +0.27%
the broker noted. AXA shares eased 1.3% in Paris.

Prudential's shares rose sharply on M&A speculation last week, along with the entire insurance sector.

Zurich Financial Services Group (001107539) ended lower after Friday's 5% rise, as St. Paul Travelers Cos.
STA, +12.50%
denied it's in talks with Zurich over a merger deal. See full story.

Roche, Ericsson gain ground

Away from financial services, Swiss drug company Roche
RHHDY
rose 0.6% after majority-owned Genentech
DNA, +0.00%
issued a new financial forecast last Friday, stating that it expects adjusted earnings per share to grow by 40% to 50% this year. See full story.

"Genentech's five-year guidance bodes well for margins at Roche, as well as strong revenue trends," said analysts at Bear Stearns.

In the technology sector, Ericsson
ERICY
gained nearly 4% in Sweden after it said on Friday that it has made a $178 million offer to buy the assets of U.S.-based Riverstone Networks, a designer and seller of ethernet fixed-line access routers.

"We see this potential acquisition as positive as we believe that Riverstone's products will fill a gap in Ericsson's portfolio," said analysts at Citigroup.

Riverstone Networks, which has been operating under Chapter 11 bankruptcy protection, will be auctioned to the public on Monday. Lucent Technologies
LU
previously made a $170 million bid for the company.

Also, Germany's Linde (648300) increased 1.7% after a report in the Financial Times newspaper said that the company has received approaches from 13 private equity groups for its forklift-truck operation, which could be worth between 1.5 billion euros and 3 billion euros.

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